Aloha, Mr. Hands: What I would do with EMI’s new music business
Aloha, Mr. Hands,
We’ve never met, though we have friends in common. In addition to working with one of your artists off/on for the past 14 years I was GM of Yahoo! Music for a bit (I recently left to join a startup you’ll hear more about soon, Topspin). I commend you for having the guts to take on the EMI challenge. While I know everyone is beating up EMI for being at the bottom of the heap at the moment, EMI also has the least to lose and still a great shot at building a new industry on top of a valuable catalog. We are all watching with a great deal of interest to see if you can pull it off. I am sincere in wishing you the best and looking forward to meeting you in person.
I was having lunch (and an incredible Rosé) on the beach with some folks from your company at MIDEM this year and after everyone was slightly buzzed I earnestly threw out my vote for how to change EMI’s new music business. I was expecting someone to explain to me why my ideas were terrible or simply impractical, but instead they said, “I wish you’d tell that to Guy Hands.” I promised them I would. That was back in January but I haven’t entirely lost the thread. True to my word, I’m finally making the time to jot my thoughts down here. Sorry I haven’t written sooner, it’s been a busy year for me. I’m sure what I present is a strategy that has already been discussed at your company; I don’t claim to have discovered anything novel. But perhaps my vote for the approach below will count for something.
In a nutshell: With the disappearance of advantaged label competencies such as superior production, distribution, and marketing, reconfigure your labels to be based around affinities and focused narrowly enough to serve roughly the same audiences from release to release. The labels would be very small teams responsible for fan cultivation, focused and direct marketing, and A&R. They would rely on EMI for service, support, and tools (generic marketing would happen on the EMI mothership, for example).
Now in a bit more detail…
Labels used to bring a lot to the table:
- Capital (aka money, not to be confused with Capitol when discussing EMI). Making records was expensive. Up until ProTools arrived on the scene there were less than 500 “professional” studios in the US and only 2500 people that knew how to operate them. Making “professional” sounding (Supertramp, REO Speedwagon, Styx, you know) albums was expensive.
- Distribution. Vinyl records were heavy. Getting records to Musicland, Tempo, Peaches, Tower, and even Schoolkids took a fleet of trucks and people on the ground managing distribution. Al Teller once told me when he was running Columbia he used to take artists into the local record store to show them how well the Columbia product was stocked. That’s because distribution was HARD and it MATTERED. And big companies could do it much better than small companies could. But that’s gone. Distribution is trivial and none of the stores I mentioned even exist anymore (SCHOOLKIDS A^2 RIP, you gave me so much as a kid).
- Marketing. Lets face it, until recently music marketing meant radio and then MTV. Nothing else really moved the needle except maybe paying for placement at retail and in retail cooperative advertising (see “Distribution”, above, for why that is starting to lack, too). But now that your customers’ attention is going elsewhere (see my original Media 2.0 Physics presentation from 2+ years back for more on attention scarcity) your marketing is becoming less efficient just as it is becoming more important.
Without the advantages of access to capital and a distribution stranglehold, marketing (which will come to mean both acquiring new fans and managing your relationship with existing ones) is where the real battles of the new music industry will be fought. The question I would be asking is: What real, defensible advantages do we have in marketing?
Since marketing no longer means dealing with independent radio promoters, radio stations, and music video television stations for play and instead means building real, trust-based relationships with fans directly, there’s no efficiency in marketing Robbie Williams today and Iron Maiden tomorrow. You’re lacking the focus a Vagrant or Victory (or closer to my heart, Dischord or from the “wildly profitable” category, Jive in its late 90s heyday) who are more or less going back to the same group of fans with each release. Hell, Vagrant even spun off two new labels, one for kids and one for heavier music. They’re focusing on what they know and segmenting their marketing efforts by affinity group.
If I’m an artist, I’m probably better off having a small label start building my career than I am submitting to a major, going through the buckshot marketing machine and hoping against hope they’re going to break me at radio or MTV. If the small label has an existing relationship with a group of people already inclined to like my style, they have a better chance at building my career from the bottom-up than I have hitting it big in the channels of radio or MTV.
If, as this hypothetical artist on an indie label, I get traction, will I then move up into the major system? In the old days I *had* to if I wanted to reach a wider audience, but not anymore. If I’m the White Stripes of tomorrow do I do a 360 deal with the label or do one with myself? I can afford to record my own music, I can distribute in 100 different ways by myself (and keep more of the profits), so if I’m going to partner with you for my releases you’d better have better access to a larger audience than I could generate on my own. If my song fits in the limited (and shrinking) channels of radio and music television I might have a shot. But if not, what do you offer?
If you had a set of meaningful, affinity-based labels you would have the real asset of a trust-based relationship with a captive audience to offer. Every artist wants to be on the same label as their musical heroes. And consumers need filters.
Plus you would have a powerful asset smaller labels wouldn’t: You would still keep a “special forces” virtual label team working the acts that are ready to breakthrough to the mainstream. When an artist is ready to break out of the box the affinity label draws around them, you have the infrastructure, team and experience to take the act mass market, worldwide, QUICKLY. Small labels can’t offer that to an artist. Your labels would be very attractive to artists as you’d have built-in audiences to bootstrap them with, and also the rocket fuel should they stumble upon the next Funky Cold Medina or Bust A Move (sorry, Delicious Vinyl Mixtape in the car).
You have a couple such labels already. Blue Note is an obvious one, though it’s a long way from the golden days of Rudy Van Gelder. DFA is a more recent addition that fits the bill, I hope you can hang on to them. No offense meant to my snowboard friend Jason but what do Daft Punk, Meat Loaf, KoRn, and The Stooges have in common from an audience perspective? How is there any efficiency in the same marketing team working all of those records (and scads of others just as unaffiliated) in the past year?
(Oh and btw, Syd, every link on HollywoodAndVine.com takes me to a 404…) I would break these old labels up into new labels which can concentrate on and build the trust of like-minded audiences, post-haste.
If you look at my aforementioned Media 2.0 Physics presentation from a couple years back you’ll see I’ve been saying something similar for a long time. I’ve spoken to a number of folks at the majors about this over the years and they all seem to get what I’m saying, but for one reason or another it just isn’t practical for them to focus like this. One friend at a major is consolidating all the “rock” acts under one heading but by his own admission it’s not as focused as I’m describing above. My guess is he’ll have some increased success with this increased focus but not as much as if he broke it down more narrowly by audience.
So what are you waiting for?
Best of luck, however you proceed from here. Hope to meet you soon,
ps – What’s up with leaking the hire of Google’s CIO on April Fool’s day? No commentary meant on the hire but the timing was a bit inopportune, no?
Hey blog readers,
Thanks for reading. I’m curious to see a little discussion around this. I’m really not an expert in this arena, so I’m genuinely curious why my idea is a bad one and why no major is really pursuing this. I’m also curious to hear more examples of where this has/hasn’t worked. Personally I see focused labels succeeding with far more ease than non-focused ones. Dischord has made money in spite of themselves via focus, quality, and building trust with its fan-base. At the other end of the spectrum Jive focused on *just* pop music and ended up selling the company for $3B (the largest-ever acquisition of an indie label). There’s Epitaph (and Anti), Matador, Sub Pop, Merge, and then there’s TVT. A little label from Bloomington called Secretly Canadian can have an artist who wins The Mercury Prize. What’s to learn here? Very curious to get your thoughts. Please leave them below.
Thanks for dropping by,